By Kevin Buckland
TOKYO (Reuters) – The dollar held steady on Thursday after its sharpest rally since early June, as traders looked ahead to speeches from key Federal Reserve policymakers later in the day for clues on the pace of rate cuts.
The US currency rebounded strongly overnight from a more than one-year low against the euro and a 2.5-year low against sterling.
While there was no clear catalyst for the recovery, investors appeared to take a more nuanced view on how aggressive future US rate cuts would be, with Fed speakers this week providing no clear picture of the path forward.
On Wednesday, Fed Governor Adriana Kugler said she “strongly supported” the decision to cut rates by half a point earlier this month to kick-start the easing cycle, but did not discuss her preferences for the pace of cuts from now on.
Earlier this week, Chicago Fed President Austan Goolsbee said policymakers “cannot run behind the curve” if the economy is to make a soft landing. Atlanta Fed President Raphael Bostic said the central bank does not need to make a “crazy rush” to cut rates.
“I don’t feel like it’s particularly unanimous at the moment,” said Kenneth Crompton, chief interest rate strategist at National Australia Bank (OTC:).
“It kind of feels like they’ve caught up… and from here it’s probably more 25s than 50s.”
Later on Thursday, Fed Chairman Jerome Powell will give pre-recorded remarks at a conference in New York, where New York Fed President John Williams will also speak. Boston Fed President Susan Collins and Fed Governors Michelle Bowman and Lisa Cook will also take the stage at several other locations.
Weekly US jobless claims data will be closely watched later on Thursday, given the Fed’s shift in focus to employment and away from inflation.
“To the extent that the Fed’s dramatic weakening in the labor market will be an implicit part of what’s needed to support market prices for at least one more 50 basis point cut this year, this is the best high-frequency indicator we have on that” , says NAB’s Crompton. said.
Traders still expect a second massive 50 basis point rate cut at the Fed’s next meeting in November, but according to CME Group’s (NASDAQ:) FedWatch Tool, the odds fell to 57.4%, compared to 58.2% a year earlier. day earlier.
The , which measures the currency against the euro, sterling, yen and three other major currencies, fell 0.10% to 100.84 as of 0444 GMT, after jumping 0.57% on Wednesday, the largest increase in one day since June 7.
The euro was little changed at $1.1143, having retreated sharply from $1.1214, a high not seen since July last year.
Sterling remained stable at $1.33425. On Wednesday, the price climbed to $1.3430 for the first time since February 2022.
The yen hit a three-week low of 145.04 per dollar and last touched 144.77.
Minutes from the Bank of Japan’s July meeting, when the central bank raised short-term interest rates, showed policymakers were divided over how quickly the central bank should raise rates further.
The Australian dollar rose 0.37% to $0.6848, rebounding from Wednesday’s sharp decline from a 19-month peak of $0.6908. [AUD/]
The rate rose to 7.0149 per dollar in offshore trading after retreating from its highest level since May last year at 6.9952 on Wednesday.
The Swiss franc was little changed at 0.8498 per dollar ahead of a central bank policy announcement on Thursday, with a third straight quarter-point rate cut widely expected.
